Interactive Brokers publishes notable Q3’2023 earnings report

Rick Steves

Interactive Brokers’ Q3 2023 results clearly indicate the firm’s strong performance, despite some headwinds in trading volumes for certain asset classes.

Interactive Brokers Group, Inc., an automated global electronic broker, released its third-quarter earnings for 2023, showcasing a significant uptick in several key financial metrics as compared to the same period last year.

The company reported GAAP diluted earnings per share (EPS) of $1.56, a sharp rise from last year’s $0.97. On an adjusted basis, EPS was $1.55, marking a notable increase from the $1.08 reported in the third quarter of 2022.

Pretax profit margin rises to 73%

Net revenues also saw a marked surge, standing at $1,145 million in GAAP terms and $1,139 million on an adjusted basis. These numbers represent an increase from the year-ago quarter’s figures of $790 million in reported net revenues and $847 million as adjusted.

Commission revenue rose 4% to $333 million, despite a mixed bag in customer trading volumes. Options contracts saw a robust 18% increase, while futures contracts and stock share volumes contracted by 1% and 22%, respectively.

Net interest income soared 55% to $733 million, bolstered by higher benchmark interest rates and increased customer credit balances.

Other income surged to $27 million, mainly driven by a $37 million gain from the company’s investment in Tiger Brokers and a $23 million increase due to its currency diversification strategy.

Expenses related to execution, clearing, and distribution fees swelled 14% to $98 million, reflecting a surge in customer trading volume in options.

The company’s income before taxes for the quarter was $840 million, or $834 million as adjusted, a stark contrast to the $523 million and $580 million reported and adjusted figures from Q3 2022.

Additionally, the company maintained a robust pretax profit margin of 73% for the current quarter, both as reported and as adjusted. This compares favorably with the 66% and 68% reported and adjusted margins from the same period last year.

Customer accounts up by 21%

Interactive Brokers also provided updates on other key aspects of its operations:

Customer accounts swelled by 21% to 2.43 million.
Customer equity jumped 29% to nearly $370 billion.
Daily average revenue trades (DARTs) slightly dipped by 1% to 1.91 million, while cleared DARTs saw a marginal increase to 1.71 million.
Customer credits and margin loans rose by 3% and 8% to $98.0 billion and $43.6 billion, respectively.
Dividend Announcement
The Board of Directors declared a quarterly cash dividend of $0.10 per share, payable on December 14, 2023, to shareholders of record as of December 1, 2023.

IBKR continues its currency diversification strategy, basing its net worth in GLOBALs, a basket of 10 major currencies. This strategy negatively impacted comprehensive earnings by $93 million this quarter, as the U.S. dollar value of the GLOBAL decreased by approximately 0.66%.

Interactive Brokers’ Q3 2023 results clearly indicate the firm’s strong performance, despite some headwinds in trading volumes for certain asset classes. With substantial growth in net interest income, customer accounts, and equity, the company appears to be on a solid trajectory for the foreseeable future.

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